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huhtikuu 2021

SAVINGS & INVESTMENT Notes NCERT Solutions for CBSE Class 12 Economics : EduMple

By Forex Trading

difference between ex ante and ex post investment

We show that this may make investment unprofitable, and we then consider realistic policy measures to reestablish investment incentives. In a given state of expectation both
the active and the passive demands depend on the rate of interest. So sometimes
does the supply; but not necessarily, for the banking system may aim at the
quantitative regulation of money without much regard to the rate. In any case,
given the state of expectation of the public and the policy of the banks, the
rate of interest is that rate at which the demand and supply of liquid resources
are balanced. In the main the flow
of new finance required by current ex-ante investment is provided by the finance
released by current ex-post investment. When the flow of investment is at a
steady rate, so that the flow of ex-ante investment is equal to the flow of
ex-post investment, the whole of it can be provided in this way without any
change in the liquidity position.

The additional factor, previously overlooked, to which Prof. Ohlin’s emphasis
on the ex-ante character of investment decisions has directed attention, is the
following. The ex-ante analysis is essential, as it can help an investor check an investment’s viability. In addition, forecasted returns can be used as a benchmark for whether to invest in a particular security or not. The derived value can then be used to assess investment price variations, earnings, or projected returns of a security or investment.

Major Aspects of Saving and Investments

They must deplete their cash
balances, overdraw their accounts, or take up securities to be paid by instalments over the whole period of the investment. Now, I readily admit that
the intention to save may sometimes affect the willingness to become unliquid
meanwhile. This factor should certainly be included in the list of motives
affecting the state of liquidity-preferences (it is not emphasised sufficiently
by merely referring to the amount of expected future income). But it is only one
amongst many, and, in practice (I should have thought), one of the least

Canada Should Avoid Costly Ex Ante Regulation of Digital Markets – Lexology

Canada Should Avoid Costly Ex Ante Regulation of Digital Markets.

Posted: Mon, 08 May 2023 07:00:00 GMT [source]

On the other hand, beta measures a financial asset€s systematic risk (market risk). Ex-post is calculated using the beginning and ending asset values for a specific period, any growth or decline in the asset value, plus any earned income produced by the asset during the period. Analysts use ex-post data on investment price fluctuations, earnings, and other metrics to predict expected returns.

Mobile termination rates and retail regimes in Europe and the US: A unified theory of CPP and RPP

But when the rate of investment is changing in
the sense that the current rate of ex-ante investment is not equal to the
current rate of ex-post investment, the question needs further consideration. At any rate, it is only through its influence on
current liquidity-preferences that ex-ante saving can come into the picture. This type of person does not like to take risks and
feels uncomfortable when they do take risks. Traditional finance theory is based on the assumption that
market participants are risk-averse. This assumption implies that market participants will not choose to
invest when the probabilities for losing or gaining a dollar amount generate an expected value of zero (a
fair game).

  • Ex-post saving refer to the actual or realised saving in an economy during a year.
  • Therefore, a large part of the EU population does not have access to advanced broadband services.
  • This factor should certainly be included in the list of motives
    affecting the state of liquidity-preferences (it is not emphasised sufficiently
    by merely referring to the amount of expected future income).
  • Our benchmark model with ex-ante co-investment draws on Bourreau et al. (2018), in which the authors focus on co-investment as an alternative to standard access regulation.

After this, an evaluation of the changes in the value and the revenue generated by the asset is done. This method presents the actual outcomes of the company based on historical data. Alternatively, if the introduction of policy resulted in price hikes in the future, then the policies introduced by the government were not up to the mark. Ex-post saving refers to actually organized saving in an economy during the year. In this research note, we propose a Brinson-style attribution scheme that can be used to quantify the effects.

Regulation and investment

To begin with, they do not know
what their incomes are going to be, especially if they arise out of profit. Finally, even if they were prepared to borrow against their
prospective savings, additional cash could not become available in this way
except as a result of a change of banking policy. Surely nothing is more certain
than that the credit or ”finance” required by ex-ante investment is not mainly
supplied by ex-ante saving. Finally, we discuss combining remedies by implementing co-investment options in some areas and risk premia in others. First, we show that a negative risk premium (i.e., subsidies) allows correcting partially – but not fully – the market structure distortion in the areas with less entry than in the benchmark.

However, the option reduces (but does not fully eliminate) the coverage distortion by making investment more attractive for the incumbent. By contrast, a positive risk premium increases coverage while reducing the entrant’s willingness to co-invest and enter ex post. Only a negative premium (i.e., a subsidy paid by the incumbent to the entrant) could reduce the market structure distortion.


Buying a lottery ticket loses you money ex ante (in expectation), but if you win, it was the right decision ex post. It is also known as market risk
because this risk affects the entire market. Examples include changes in interest rates of banks,
inflation, political instability, natural disaster.

Second, we show that to correct the total coverage distortion, one should implement co-investment options in areas with moderate cost to be covered and a risk premium in the most outlying and costlier areas. Using a numerical example, we show that introducing such a combination of ex-ante and ex-post remedies can increase total welfare, compared to the outcome under ex-post co-investment. Ex-post yield differs from ex-ante yield because it represents actual values, essentially what investors earn rather than estimated values.

Cooperative investment, access, and uncertainty

However, risk-averse investors will invest when they think the expected value of the
investment is positive. This means risk averters will hold risky assets when the expected return is
sufficiently large enough to compensate them for taking on risk example, people who are extremely
risk-averse might only invest in debt securities and not invest in the share market at all. They might
choose to invest in companies with a long history and a reputation for paying dividends. Whereas a risk-
seeking person will invest in riskier assets or prefer investments with uncertain returns because they see
the potential of obtaining higher returns.

What is ex-ante and ex-post example?

Ex-ante is used most commonly in the commercial world, where results of a particular action, or series of actions, are forecast (or intended). The opposite of ex-ante is ex-post (actual) (or ex post). Buying a lottery ticket loses you money ex ante (in expectation), but if you win, it was the right decision ex post.

On the other hand, closing value is taken as the current market price or the price investors are willing to pay for acquiring that asset. The government will pass further policy changes to keep inflation under difference between ex ante and ex post investment control. Since the event will take place in the future, it is unknown how the economy will perform. The expected result is a benchmark for comparing the predictions with the actual outcomes.

Can ex-post and ex-ante savings be equal?

Ex-ante savings and Ex-ante investment are not always equal because at different level of income Aggregate demand is not equal to aggregate supply.